A US arbitrator said Cooper Tire and Rubber Co cannot sell two of its factories in the country to Onkar Kanwar's Apollo Tyres Ltd until a collective bargaining agreement is reached between the Indian company and members of the plants' union.
The decision could delay Apollo Tyres's plan to buy U.S.-based Cooper in a debt-funded $2.5 billion deal, which is already facing opposition at a factory in China.
The United Steelworkers (USW) had said terms of the agreement, which covers about 2,500 USW members, will be violated if Cooper closes the deal without Apollo entering into a new agreement with the workers at Findlay, Ohio, and Texarkana, Arkansas.
"The USW said it looked forward to resuming bargaining with Apollo Tyres and Cooper," USW Secretary Treasurer Stan Johnson said in a statement on Friday after the arbitrator's decision.
Cooper had previously argued that the current collective bargaining agreements would continue after the merger. It did not respond to an email seeking comment outside US business hours on Monday.
"Apollo Tyres looks forward to working with Cooper and the USW to resolve this matter," it said in an email.
Apollo Tyres had agreed in June to buy Cooper Tire to take advantage of the large U.S. and China auto markets, but labor unions in both countries and investors are worried about the risks arising from the large amount of debt.
The labor union at Cooper Chengshan Tire Co in China's eastern Shandong province has been striking against the deal for about three months. Chengshan Group, the local partner in the joint venture, is also against the deal, and has filed a lawsuit against Cooper in a local court, seeking to dissolve the JV.